SF Prop J Explained: Ending the Transfer Tax Break on Big Foreclosures

Prop J is an ordinance placed on the ballot by the Board of Supervisors. It targets a decades-old tax break for lenders who take over property through foreclosure.

The loophole

When property changes hands, San Francisco charges a transfer tax. But lenders who take a property through foreclosure, or a deed in lieu of foreclosure, are taxed only on the amount above the unpaid debt, so they often owe little or nothing, according to the League of Women Voters of San Francisco.

SPUR said the exemption is increasingly used by investors who buy distressed loans and then foreclose. It said that since 2023, 56% of exemption claims have been for properties worth over $10 million. Between 2023 and 2025, investment properties acquired this way avoided more than $450 million in transfer tax, SPUR said.

What it does

Starting March 1, 2027, foreclosures on commercial buildings, hotels and buildings with five or more homes would be taxed on full market value. Single-family homes, condos, co-ops and buildings with four or fewer homes would keep the exemption, GrowSF said. The measure would also tax foreclosures on the ownership stake of the company that holds a building.

How much it raises

GrowSF said the controller estimates an average of $100 million to $150 million a year over the first five years, highest early and then falling. The amount depends on how many big properties go through foreclosure.

Who is for and against

SEIU 1021, Teamsters Local 665 and the SF Democratic Party support it, the League said. The SF Taxpayers Association opposes it, arguing lenders will raise rates and avoid local real estate. SPUR supports it. Oakland voters are deciding a similar measure, Measure FF.

More on the San Francisco ballot: where and how to vote in SF, when SF results come out and Props D, E and F compared.

How to vote

Election Day is Tuesday, Nov. 3. Polls and vote centers close at 8 p.m., and mailed ballots must be postmarked by Election Day and arrive within seven days. You can check your registration and ballot status at sos.ca.gov/elections. California lets you register and vote the same day at a vote center.